Mr. Craig Leon reports
REVELSTOKE EQUITY INC. ANNOUNCES UPDATE TO PROPOSED BUSINESS COMBINATION WITH ZONETAIL INC.
Further to the press release dated Jan. 31, 2018, Revelstoke Equity Inc. has provided more information in respect of the proposed transaction pursuant to which Revelstoke and Zonetail Inc. are expected to combine their business operations. Zonetail is a company which specializes in a mobile technology platform of local mobile content, which, using a cloud-based content management system, connects users with their location and surroundings, as described in more detail in the previous press release. Upon completion of the transaction, the combined entity (the resulting issuer) will continue to carry on the business of Zonetail.
Proposed subscription receipt financing
As a condition to the transaction, Zonetail is required to complete a private placement financing, which is currently scheduled to close on July 13, 2018, for gross proceeds of $2,003,416.56. The private placement is an offering of subscription receipts of Zonetail at a price of 18 cents per subscription receipt. Each subscription receipt issued in connection with the private placement will be automatically exchanged immediately prior to the completion of the transaction (without any further action by the holder of such subscription receipt and for no further payment) for common shares of Zonetail, each of which shall be exchangeable into one common share of the resulting issuer, upon satisfaction of certain escrow release conditions. The subscription receipts will be governed by a subscription receipt agreement to be dated the date of closing of the private placement between Zonetail, Gravitas Securities Inc. as lead agent for the private placement, and TSX Trust Company as registrar and transfer agent for the subscription receipts and as escrow agent to receive the proceeds of the private placement. The net proceeds of the private placement will be used for the initial development of Zonetail's blockchain application technology, sales and marketing efforts, and general working capital and corporate purposes.
Revelstoke and Zonetail executed an engagement letter dated Jan. 18, 2018, with Gravitas and Canaccord Genuity Corp., which is expected to terminate and be superseded by an agency agreement to be entered on the closing date with Gravitas, Canaccord and Beacon Securities Ltd., as co-lead agents in connection with the private placement. Under the terms of the agency agreement, the agents will be appointed to act as agents in connection with the private placement on a best efforts basis. In connection with the private placement, the agents will be entitled to a cash commission of 8 per cent of the aggregate gross proceeds placed under the private placement payable in cash, other than certain subscriptions in the amount of: (i) $444,999.96, for which the commission will be reduced to 6 per cent; (ii) $250,000, in respect of which no commission will be payable. Twenty-five per cent of the commission will be paid to the agents at closing of the private placement, and the remaining 75 per cent shall be paid to the agents by the subscription receipt agent from the funds held in escrow on the date that the escrow release conditions set out in the subscription receipt agreement are satisfied. The agents will also be granted warrants by Zonetail to acquire that number of Zonetail shares equal to 8 per cent of the total number of subscription receipts sold under the private placement, other than certain subscriptions in the amount of: (i) $444,999.96, for which the percentage of agents' warrants issued will be reduced to 6 per cent; (ii) $250,000, in respect of which no agents' warrants are payable. Each agent's warrant will be exercisable at the private placement price per Zonetail share (or if exercised after closing of the transaction, per resulting issuer share), from the closing date and for a period of 24 months from the escrow release date. In consideration of the agents' services in connection with the co-ordination and review of the private placement, Zonetail will issue to the agents 222,602 Zonetail shares, which are equal to 2 per cent of the aggregate number of subscription receipts to be issued pursuant to the offering. In addition to the foregoing compensation, Zonetail will also pay to the agents a fee equal to $8,000 plus applicable tax; and (ii) issue to the agents, 44,445 warrants, as a work fee. Each work fee warrant is exercisable on the same terms as the agents' warrants.
The agents have also been granted the option to acquire up to an additional 15 per cent of the number of subscription receipts sold under the private placement, exercisable in whole or in part at any time on or prior to the date that is 30 days following the closing date of the private placement, on the same terms as the subscription receipts sold under the private placement.
The closing of the private placement is conditional upon, among other things, the completion of satisfactory due diligence by the agents, the receipt of all necessary corporate and regulatory approvals, and the execution of the agency agreement.
Summary of financial information
The attached table sets forth certain annual and interim unaudited financial information of Zonetail for the periods indicated.
SUMMARY OF FINANCIAL INFORMATION
Three months ended Year ended Year ended
March 31, 2018 Dec. 31, 2017 Dec. 31, 2016
Assets $316,577 $121,137 $787,158
Liabilities 1,570,963 1,583,781 1,040,034
Equity (1,254,386) (1,452,644) (252,876)
Revenue 6,499 43,973 80,892
Operating expenses 253,041 601,386 1,596,759
Net loss 246,542 517,837 4,653,240
Controlling securityholders of Zonetail
No person, either directly or indirectly, holds a controlling interest in or otherwise controls or directs Zonetail.
It is currently anticipated that the transaction will occur as a three-cornered amalgamation between Zonetail, Revelstoke and a to-be-incorporated wholly owned subsidiary of Revelstoke (Subco), the final structure of the transaction being subject to receipt of tax, corporate and securities law advice for both the corporation and Zonetail. It is expected that the structure of the transaction will be finalized in a definitive agreement entered into between the parties. Subject to finalization of the definitive agreement and based on the capitalization, it is currently anticipated that Revelstoke will satisfy the transaction price for the Zonetail shares by issuing in the aggregate 57,584,711 resulting issuer shares to the holders of Zonetail shares at a deemed price of 18 cents per resulting issuer share for aggregate consideration of $10,365,247.98.
The transaction is subject to regulatory approval, including the approval of the exchange, and the satisfaction of customary closing conditions, including the approval of the definitive agreement and the transaction by the board directors of each of Revelstoke and Zonetail and completion of due diligence investigations to the satisfaction of each of Revelstoke and Zonetail, as well as the conditions described herein. The transaction will be carried out by parties dealing at arm's length to one another and therefore will not be considered to be a non-arm's-length qualifying transaction, as such term is defined under the policies of the exchange.
In connection with the transaction, it is expected that the corporation will hold an annual general and special meeting to, among other items of business, change its name to Zonetail Inc. upon completion of the transaction. It is not anticipated that the transaction will be subject to approval of the Revelstoke shareholders at this time.
In due course once available, Revelstoke and Zonetail will provide further details by press release in respect of the transaction, including the final terms of the definitive agreement and the applicable security exchange ratios, and the further details of any meetings of the shareholders of Revelstoke and Zonetail required to approve the transaction and matters related thereto (as applicable).
Proposed directors and officers of resulting issuer
As will be further described in the filing statement to be filed by the corporation in connection with the transaction, the following individuals have been identified as proposed directors and officers of the corporation following completion of the transaction.
Mark Holmes, president, chief executive officer, corporate secretary and director
Having owned and managed Kingsway Agencies, a leading company in hospitality content and marketing services, he brings 15 years of category learning and leadership to Zonetail. His experience and network, in both the hotel and retail/restaurant industries, along with Kingsway's 55-year-old legacy, are an integral component in the success of Zonetail.
Daniel Crandall, chief financial officer
He has more than 10 years of experience working with public companies. He specializes in providing chief financial officer services, accounting, regulatory compliance and management advisory services to numerous issuers on the Toronto Stock Exchange, the exchange, Canadian Securities Exchange and other international exchanges. He is a CPA and CA with an honours bachelor of accounting (co-op) degree from Brock University.
Paul Scott, director
He has been the president of Scott Analytics since 2008 and was also the founder of Agency for Cycling Ethics. Prior to his work as an entrepreneur, he was a patent attorney in the Manhattan offices of Sidley and Austin.
Chip Rogers, director
He serves as president and chief executive officer of AAHOA, the nation's largest hotel owner association. He serves as a member of the Forbes Nonprofit Council, the California State University Hospitality & Tourism Management Education Alliance advisory panel, member of the American Legislative Exchange Council Private Enterprise advisory board of directors, member of the California Hotel and Lodging Association board of directors, and member of the Community Leaders of America board of directors. Prior to joining AAHOA, he had a long career as a small business owner and public servant. He previously served in the Georgia General Assembly, being elected six times. Senator Rogers was unanimously elected to serve two terms as the Senate majority leader.
Adam Topp, director
Mr. Topp has worked in the health care sector for more than 25 years, developing a unique background that combines financial, clinical and operational leadership, as well as consulting. Prior to forming BIG Healthcare, he was a senior associate consultant with HayGroup Health Care Consulting. He also worked with Hay Group between his appointments at the Winnipeg Regional Health Authority and Sunnybrook & Women's College Health Sciences Centre. In Winnipeg, Mr. Topp was chief operating officer simultaneously for both Winnipeg Health Sciences Centre and Grace General Hospital. At Sunnybrook for 10 years, he was vice-president, clinical operations, and prior to that, vice-president, corporate performance, and chief financial officer.
The common shares of Revelstoke are currently halted from trading and are not expected to resume trading until completion of the transaction.
For further information concerning the transaction, please refer to the press release of the corporation dated Jan. 31, 2018, available on SEDAR. If and when a definitive agreement between the corporation and Zonetail is executed, the corporation will issue a subsequent press release in accordance with the policies of the exchange containing the details of the definitive agreement and additional terms of the transaction.
We seek Safe Harbor.
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